Corporate structures in Luxembourg. Presenta4on by Joram Moyal Avocat à la Cour, Rechtsanwalt & Solicitor

Transcription

1 Corporate structures in Luxembourg Presenta4on by Joram Moyal Avocat à la Cour, Rechtsanwalt & Solicitor

2 Luxembourg Luxembourg Luxemburg in the European Market A 500 Million + Customer Base Arguments in favour: Direct access to major European markets Trans- na4onal approach A friendly business environment Business- orientated government VAT Intellectual Property related tax advantages Mul4lingual workforce

3 Structures in Luxembourg Is it relevant where your global headquarters are based? The objec4ve: maximize opera4onal and financial efficiency in an op4mal structure that enables superior responsiveness to corporate needs. Who is based in Luxembourg and why did they come?

4 Structures in Luxembourg How many Banks are there in Luxembourg? How many Investment Funds? Anyone else? Supervision of the financial sector - CSSF? More than 35,000 companies from all over the world have been formed in Luxembourg by investors

5 Free name Free name Free name Most used company forms Société Anonyme (S.A.) fully subscribed but possibility to pay only ¼ (release) Represented by shares (registered or bearer shares) Min. 1 No maximum shareholders Board of directors (min. 3) and one chairman General mee4ng once a year at least independent auditor Soicété à responsabilité limitée (S.à r.l.) fully subscribed and paid (released) Min. one, maximum of 40 Shareholders. Director (gérant technique) No need of a general mee4ng if the number of shareholders 25 No need of an independent auditor if the number of shareholders is less than 25 Société à commandite simple (SCS) No miminum capital General partner and limited partner General partner being personally responsible Managed by Limited Partner No need for independent auditor

6 TaxaEon in Luxembourg The legal and tax environment is certainly one of the most important reasons why Luxembourg is aerac4ve to companies looking for a loca4on for their headquarters Tax Rates Luxembourg has favourable tax treaty aggreements with 57 countries including Israel. It has a very compe44ve company taxa4on rate of 29.22% (corporate tax of 21.00% + unemployment surcharge 0,7% + municipal business tax 6.75% + wealth tax of 0.5% of net assets). However, most investment vehicles are either exempt from such taxes or the tax base is reduced to zero by certain exempeons There are no withholding taxes on dividends, paid to EU or double tax treaty resident companies including Israel, no withholding taxes on interest and royal4es.

7 IP Tax Regime As from 1st of January 2008, Luxembourg introduced a favorable tax regime for income derived from certain Intellectual Property rights (hereinamer referred as IP rights ) Benefit from an allowance of 80% on the net income derived from intellectual property, reducing the tax rate to 5.72 %. The allowance covers income derived from the use or the right to use Copyright on somware Patent Trade mark, design or model Domain name The 80% deduc4on is furthermore applicable to capital gain realized on the sale of such IP right.

8 IP Tax Regime

9 Structures in Luxembourg The typical Investment Structures SPF (Private Porpolio Management Company) SOPARFI (Investment Holding Company) ROYCO (Royalty Company) FINCO (Financing Company) PROPCO (Company owning Real Estate) BRANCH (Branch of Non- Resident Company) SHIPCO (Shipping Company) SIF (Specialised Investment Fund) SICAR (Investment Company in Risk Capital) SV (Securi4sa4on Vehicle)

10 SPF (PRIVATE PORTFOLIO MANAGEMENT COMPANY) A tax free company to hold and manage personal private porpolio of investments and cash. The investors in a SPF should be: (i) individuals ac4ng within the scope of the management of their own private wealth, (ii) an asset management vehicle ac4ng exclusively for the benefit of the private wealth of one or more individuals or (iii) an intermediary en4ty ac4ng on behalf of such individuals/vehicles An SPF is exempt from company and wealth taxes if less than 5% of its dividend income, capital gains, interest and royalty income is received from companies subject to company tax of greater than 10.5% not protected by double tax trea4es. An SPF pays a subscrip4on tax of 0.25% per annum on its net assets with a maximum of EUR 125,000 per year. No withholding taxes are imposed on dividends, interest and royal4es distributed to shareholders.

11 SOPARFI (INVESTMENT HOLDING COMPANY) A SOPARFI is a fully taxable parent company whose primary ac4vity is to hold par4cipa4ons in any other company in the world. Qualifying shareholdings and related debt are excluded from wealth tax Dividends and capital gains received by a SOPARFI are tax exempt if received from companies that fall under the par4cipa4on exemp4on Royalty income and interest income can be subject to special tax treatment (IP Tax Regime)

12 ROYCO (ROYALTY COMPANY) A ROYCO owns, patents, designs, models, domain names or somware copyright Will licence the usage rights to any other company in return for royal4es. 80% of the royal4es received and capital gains made from the sale of IP are tax exempt resul4ng in an effec4ve tax rate of 5.72%. Use of certain financial instruments and an advance agreement may reduce the effec4ve tax rate further.

13 FINCO (FINANCING COMPANY) A Luxembourg FINCO borrows money from its parent company and provides a loan to its subsidiary company. Interest margins from 0.25% to 0.125% can be agreed. Net / debt equity ra4o of 80%/20% Specific hybrid instruments such as a profit par4cipa4ng loan (PPL) or preferred equity cer4ficates (PECS) together with an advance agreement can be used to reduce the effec4ve tax rate.

14 PROPCO (COMPANY OWNING REAL ESTATE) A PROPCO owns property located outside Luxembourg or owns subsidiaries that own real estate Foreign property and related debt are excluded from wealth tax rental profits and capital gains on the sale of property are not subject to taxa4on in Luxembourg if the property is located outside Luxembourg. Capital gains on the sale of shares in and dividends received from a property owning subsidiaries are tax exempt.

15 BRANCH (BRANCH OF NON- RESIDENT COMPANY) A BRANCH is not a corporate en4ty separate from its parent company, but can carry out all types of ac4vity. Dividends and capital gains received are tax exempt, if received from companies that fall under the par4cipa4on exemp4on. Also, qualifying shareholdings and related debt are excluded from wealth tax. Royalty and interest income can be subject to special tax treatment.

16 SHIPCO (SHIPPING COMPANY) A SHIPCO buys and sells, charters in and out or manages yachts and ships. No municipal taxes are due (reducing tax to 25%) Large tax losses which can be carried forward indefinitely and investment tax credits of 14% of the cost of the vessel can be carried forward for 10 years. Capital gains generated by shipping companies on the disposal of a vessel held for at least 5 years may benefit from an unlimited tax deferral Provisions for large scale repairs can reduce company taxa4on and reduce wealth tax. Supplies of goods and services to transport, industrial and commercial seagoing vessels are exempt from VAT.

17 SV (SECURITISATION VEHICLE) An originator sells and transfers the risk of any type of asset to an SV. The SV issues shares and/or bonds to qualified investors by private placement or public offering and the cash flows generated by the assets serve to pay the investors. There is no risk diversifica4on requirement All payments made by the company to the shareholders such as dividends and interest are deduc4ble from the tax base. A one 4me capital duty of 1,250 is payable. Management services rendered to an SV are exempt from VAT

18 SIF (SPECIALISED INVESTMENT FUND) The Specialised Investment Fund (SIF) is a regulated, opera4onally flexible and fiscally efficient mul4purpose investment fund regime for an interna4onal, ins4tu4onal and qualified investor base. In comparison with ins4tu4onal funds the SIF has greater flexibility with regard to the investment policy, broadening of the sphere of investors and a more relaxed regulatory regime. Investment in a SIF is reserved for well- informed investors requiring a limited level of protec4on and looking for investment flexibility suitable to their par4cular exper4se and needs (minimum investment of per investor) There is no restric4on in terms of eligible assets of a SIF.

19 SIF (SPECIALISED INVESTMENT FUND) The net assets of a SIF may not be less than 1,250,000 Euros. This minimum must be reached within a period of twelve months following its authorisa4on. Only 5% of the capital needs to be paid up on subscrip4on. The SIF may be incorporated as an S.A., S.à r.l. or SCS The SIF pays an annual subscrip4on tax (taxe d abonnement) of 0.01% of its net asset value Investments on certain money market and pension funds or SIFs inves4ng in other funds which are already subject to subscrip4on tax are exempt from subscrip4on tax. The same applies to microfinance investment funds.

20 SICAR (INVESTMENT COMPANY IN RISK CAPITAL) A SICAR may invest in all types of private equity or venture capital investments which are considered risky. This is defined as a direct or indirect contribu4on of fund for start- ups, further development or lis4ng on a stock exchange. No risk diversifica4on is required. All dividends, interest and capital gains deriving from transferable securi4es and cash held for investment are exempt from tax. A one- 4me capital duty of 1,250 is payable. Management services rendered to a SICAR are exempt from VAT.

21 Thank you for your a,en.on Joram Moyal MMS Avocats 14a, rue des Bains L Luxembourg legal.com Tel: